high-end fashion label Burberry has been hit by the Covid revival in its largest market and key growth country China, which posted only a 1% increase in store sales across the group in the three months to early July.
The fashion brand worn by celebrities including James Bond theme singer Billie Eilish, stormy,Rihanna and Harry Potter star Emma Watsonwas forced to close 24 of its 64 stores in the area in February as the virus swept through the population again.
But excluding the Chinese market, Burberry reported a 16% increase in total sales during the period, with the European, Middle Eastern and African (EMEIA) market doing impressive business. Store sales in EMEIA grew 47% year-over-year, according to a trade update from the brand.
Burberry said it would continue to focus on “high single digit sales growth” and 20% margins over the medium term.
“While the current macroeconomic environment creates some near-term uncertainty, our performance in mainland China has been encouraging since the reopening of our stores in June and we are actively managing the headwinds of inflationthe group said.
Based on foreign exchange rates as of July 11, Burberry said it now expects a “tailback currency” of £190 million on sales and £90 million adjusted operating income for the full year 2023.
The company said it had achieved “double-digit comparable growth” in leather goods and outerwear outside mainland China and that it had seen good performance from its iconic rainwear and jackets across the group.
It was only this morning that it was revealed that China’s economic growth had been battered in the second quarter of the year due to damage caused by the widespread Covid lockdowns.
Production decreased by 2.6% between April and June compared to the previous quarter. On an annual basis, the economy grew by 0.4% in the second quarter. However, this was the worst growth since the early months of the pandemic in 2020.
Jonathan Akeroyd, chief executive officer of Burberry, said: “Our performance in the quarter was still impacted by the lockdowns in mainland China, but I was pleased to see our more localized approach fueling the recovery in EMEIA, where spending of local customers were higher than before-pandemic levels.”